The dollar inched up on Friday against a basket of currencies on encouraging data on US producer prices and industrial output, while the euro ended a good week on a weak note even as the Greek parliament approved a new bailout agreement. The greenback stabilized after weakening earlier this week when China devalued its currency, roiling global financial markets and stoking worries about the world's No 2 economy.
-- Unwinding of euro-funded trades earlier supports euro
-- China keeps yuan in check in record weekly decline
"We have seen a stability in the dollar in the past few days. The data continue to show improvement," Eric Viloria, currency strategist at Wells Fargo Securities in New York. The dollar index was up almost 0.1 percent on the day at 96.670, finishing the week with a 1 percent loss, its steepest decline in nine weeks. The greenback dipped 0.1 percent at 124.28 yen, ending the week marginally higher.
In July, US producer prices increased for a third straight month, and factory production rose at its strongest pace in eight months, the US government said. Those figures were mitigated by a surprise deterioration in the University of Michigan's index on US consumer sentiment in early August. Friday's economic readings kept in play bets the Fed will increase rates by year-end.
The euro rose earlier Friday as investors unwound euro-funded carry trades in the yuan and other emerging market currencies, which were hit hard by the yuan devaluation on Tuesday. The euro also got a boost from the Greek government's approval of a deal with creditors. But the dollar recovered on the latest US data, and the euro was down 0.3 percent at $1.1110, paring its weekly gain against the greenback to 1.3 percent. On Friday, the People's Bank of China set the yuan midpoint at 6.3975 yuan to the dollar, slightly stronger than Thursday but marking a record weekly loss of 2.9 percent against the dollar.
In response to the market turmoil, Beijing sought to allay fears that a cheaper yuan could trigger a "currency war," or a race among the world's biggest economies to cheapen their own currencies to keep their exports competitive. Some analysts said China would resume devaluation, perhaps at a slower pace, in the coming months. "A 2 to 3 percent drop (in the yuan) is not enough. They obviously have problems with its economy," said Jose Wynne, currency strategist at Barclays in New York.
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